"The distributors are pretty intertwined with the hospitals and are also pretty efficient at delivering products in large quantities and on short notice," she said. "Plus, many of the distributors provide additional services; specialized sales people, customized products, and a breadth of products like medical supplies and drugs."
Lim said Amazon would face hurdles entering the retail prescription drug market, even though they already have the Amazon RX domain name, and they’ve been in talks with generic drug manufacturers.
"In terms of pharmacy, Amazon has already been impacting the retailers in the nonprescription drug area and they could use Whole Foods as part of a pharmacy strategy," she said. "But, we think they would have to partner with a PBM to gain any real volume. Otherwise, they could only reach the cash-pay market, which is relatively small."
That might be a big hurdle because the biggest retailers have their own competing mail order pharmacies.
Lim says the wholesale drug distribution business would seem like a logical inroad for Amazon because it's good at order taking and fulfillment. But that is not the only function of wholesalers. "They also use their scale to buy drugs at a discount. Starting out amazon wouldn't have that scale unless they bought someone," she said. "Even the biggest pharm chains have thought it was best to join forces with a distributor to buy drugs."
Amazon could also shake things up in the healthcare sector by by following through on its promise to provide market transparency.
"That is maybe one of the reasons why investors are spooked because this is a very opaque marketplace," Lim said. "There are a lot of different companies involved and there are third-party payers involved and different middlemen involved. That is part of the reason for the complexity."
John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.